Promoting competition - Financial Conduct Authority

Promoting effective competition

Published: 09/09/2013
Competition can lead to lower prices, greater innovation, better design, better quality and wider choice, which ultimately leads to consumers being better off and growth in the economy.

What is competition?

Competition is a process of rivalry between firms seeking to win customers’ business over time. Markets that are competitive tend to lead to cost efficiencies, lower prices, greater choice, innovation and economic growth, which ultimately work in the interest of consumers.

It is the process of competition that needs to be protected and promoted. This does not equate to protection of specific competitors. In other words, what matters are the outcomes that competition delivers to consumers and to the economy as a whole, and not whether (inefficient) operators are unable to compete and survive in a market.

Why is the FCA promoting effective competition?

We have an operational objective to promote effective competition in the interests of consumers. We also have a duty to promote effective competition when addressing our consumer protection or market integrity objectives. Together, the objective and the duty provide us with a strong mandate to promote competition in the interests of consumers. We see this as an important new tool to help the organisation achieve its strategic aim of making markets work well for consumers.

What we have done so far

We have introduced a mobilisation phase for new firms wanting to enter the banking sector, making their journey into the market easier and less costly. By authorising at an earlier stage, new participants don’t have to build up expensive infrastructures before finding out whether they meet our rules.

How we promote effective competition

We expect to use market studies as our main tool for examining competition issues in the markets we regulate.

In approaching competition issues we will analyse the markets we regulate and target our resources based on the areas:

  • that we consider carry the greatest potential consumer harm, and
  • where we believe we can intervene and help consumers most.

In assessing whether intervention is needed, we will consider all the market features that could inhibit or distort competition leading to market failure, including but not necessarily limited to:

  • Market power held by suppliers
  • Problems in the flow of information between market participants
  • Low switching rates
  • Costs or benefits to third parties
  • Problems in the way consumers or firms make decisions
  • Too little consumption
  • Existing regulation

We will announce the launch of any market studies we carry out.